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Foreign investment liberalization and national security

The purveyors of “zombie apocalypse” scenarios, as a friend put it, are at it again. They take the most extreme and scariest scenarios and project these to keep change from happening. Don’t change. Keep the status quo. Otherwise, the zombies will come and get you.

Is rice tariffication working?

July to September of any year is when we have the lowest local supply of rice. In the past, the National Food Authority (NFA) would have been ready with at least 30 days-worth of rice stock by July 1, most of which would be imported. The remaining 60 days of rice stock to be consumed by the population were expectedly held by households and the private commercial sector. That had been how we managed the seasonality of rice production to ensure our access to our food staple.

Vox populi

I am pleased to share with readers the political section of a primarily macroeconomic and financial quarterly report my colleague, Christine Tang, and I wrote last month for GlobalSource Partners (globalsourcepartners.com). GlobalSource Partners is a New York-based network of international analysts whose client subscribers are mostly international banks and asset managers.

Why President Duterte’s senate bets won

Why did President Duterte’s Senate bets win?

The wisdom of the great unwashed?

Francis Galton, the great Charles Darwin’s half cousin, first noticed a curious fact in 1907: the average of the guesses of members of the crowd on the weight of an ox in the Plymouth country fair proved more accurate than the opinions of each selected recognized expert among the crowd. There is wisdom in the crowd. “Consensus forecasts” is one modern reincarnation; but now it is the average of a “crowd of experts.” The “Delphi method” goes further by using a crowd of experts who, in later rounds, are allowed to modify original predictions based on knowledge of results in earlier rounds with the expectation that the opinions will converge to the true value. The collective intelligence revealed by “social swarms” of networked players mediated by a collective intelligence platform follows the same logic in the digital space, and with surprisingly accurate predictions. The failures of collective rationality are, however, no less spectacular -- booms and busts in stock market, Tulipmania, Ponzi schemes, Benito Mussolini, Hugo Chavez.

There’s ‘growth,’ then there’s growth

We are so accustomed to using “growth” to refer to aggregate economic expansion that we forget it is really just a metaphor. It cannot be found in Adam Smith, who spoke instead of the “progress of opulence,” nor a century later even in Marshall who still used “progress” to mean the antithesis of poverty. Keynes used “growth” to denote increases in wealth or population -- a proper application to stock-concepts. Harrod may have been among the first to apply the term to the proportionate increase in aggregate income, perhaps illegitimately stretching the metaphor to cover a flow-concept as well. These days, of course, “economic growth” refers almost automatically to increases in measured income.

Seeing the TRAIN Law in its proper perspective

No surprise, TRAIN surfaced as an election issue: senators and congressmen who sponsored and voted for it are being unfairly though ineffectively targeted. Much of the conversation also missed the point that TRAIN is part of a larger national project designed to put our fiscal house in order coherently and comprehensively. This is an ambitious undertaking never attempted in past administrations where tax reform tended to be more piecemeal or driven by donor institutions like the IMF, or an actual or potential fiscal crises.

On credit ratings upgrade and power shortage risk

The Foundation for Economic Freedom just released a statement on the recent credit upgrade, congratulating President Duterte and his Economic Team on a job well done.

Twilight of the rule of law

In liability law, who causes the injury pays. This is the cornerstone of the rule of law. In the case of the P1.134 billion penalty imposed on Manila Water (BusinessWorld, 25 April 2019), MWSS obligates the concessionaire to pay! But if the MWSS is itself the cause of the injury, we are standing the liability principle on its head.

Should we have meat import quotas after we tariffied the QR...

Last week, BusinessWorld carried a report about a plan by Agriculture Secretary Piñol to limit meat imports due to high inventory of meats and meat products in cold-chain facilities in the country. In his words, he wants to broker a deal among meat importers and meat processors, on the one hand, and meat producers, on the other, for the amount of meat imports to be allowed into the country.

What’s up (actually, mostly down) with exports?

Observers have begun to worry that the country’s widening current-account deficits will sooner or later become a problem for continued growth. Between 2003 and 2015 the country ran a succession of surpluses but finally slipped into deficit beginning 2016 under the Duterte administration. Last year’s deficit exceeded all forecasts, coming in at 2.4% of GDP. On merchandise trade alone the deficit was close to 15% of GDP, a historically unprecedented figure.

A cornucopia of legislation

Not many people may realize it, but there has been a bountiful harvest of legislation from the 17th Congress. Both Houses of Congress have produced significant economic and socially progressive legislation since signed into law by President Duterte. Credit no doubt goes to House Speaker Gloria Macapagal-Arroyo and Senate President Tito Sotto, both legislative veterans who know how to make their respective chambers productive.

Never waste a good crisis

THE leadership and the management of Manila Water squarely took responsibility for inability to provide 24-7 service in many parts of its concession area. And voluntarily waived fees in the several hundreds of millions, despite the absence of any such obligation under its concession agreement. Such act of corporate governance and responsibility is exemplary, and from my recall, unprecedented in the Philippines. Especially since, in the view of many, the fundamental shortcoming is not theirs, but government’s. More precisely, that of the MWSS in the last administration. Despite repeated warnings of the two concessionaires at that time, MWSS abysmally failed to develop a single water source, not a single stone was turned or a shovel lifted, even as they barred the concessionaires from developing such. The “original sin.”

Embracing the light

It’s summer 2019 and the sun is beating down hard on the equator. Draught and dying crops are littering the Philippine landscape. Physical but especially mental activity is a hard slog. In the Serengeti Wildlife Reserve in Equatorial Africa, lion prides ignore prey to doze off in the shade for hours. The lions are not being lazy; they are just obeying the rule of efficient energy use. Under the harsh midday sun, the endotherms’ most energy-efficient posture is supine and asleep under the shade.

Managing change under the RTA law

Despite the rice tariffication law or RA 11203, there is a chance rice prices can go up this year if the government fails to manage well the changes it causes. The law is about a month old. But from what I know, it is not implemented yet.

Duterte’s Unfinished Revolution

President Rodrigo Roa Duterte has unfinished business.

The Most Important Appointment

We mourn the passing of Governor Nesting Espenilla. A profound loss to his family and friends, to the BSP which has been his home since UP days and to our country and people. As a tribute to him and his work, I am sharing the introduction of an interview Christine Tang and I did for GlobalSource Partners (globalsourcepartners.com) in January 2018.

Hidden violations of competitive neutrality

Competitive neutrality (CN) aims to provide a level playing field between public and private firms. State corporations competing in a market may be accorded many types of support on their operations not available to private firms such as tax and tariff exemptions, debt guarantees, exemptions from procedural requirements, exclusive purchase privileges, access to lower or subsidized interest rates, etc. These non-neutral policies distort the market and attenuate market gains. When extended to provide a level-playing field for all market players regardless of ownership in the same industry, we call it “Competitive Neutrality +” (CN+). The Philippine Competition Commission (PCC) is committed to pursue efficiency and thus CN in the market. We begin by making a distinction between de jure and de facto neutrality. A rule or law may be de jure neutral but may be de facto non-neutral, that is, enforced in a non-neutral manner by the biased enforcement of the law. We start with the proposed non-exclusive franchise for Solar Philippines.

The Evolution of President Duterte

When I’m asked what I think of President Duterte’s performance in office so far, I say that he has evolved in a positive way and that he’s is evolving further but he still has plenty of shortcomings.

To the Duterte Administration: pay attention to Agriculture!

The recent spike in rice inflation and its harm on the macro-economy and poverty incidence has focused attention to long-standing failures of our agricultural sector. This is evident in comparative statistics vs. peers, e.g. farm productivity (see table below), agriculture sector growth, rural poverty incidence.

Rice tariffication is good for our rice farmers, our country

DA Undersecretary Fred Serrano threw his support to groups urging President Duterte to veto the rice tariffication law in Friday’s issue of Business Mirror.

The main trends in the world today

What are the main trends in the world today? What are the geopolitical forces driving change and impacting societies? What will shape the future?

Small town blues

“Lotus” was the most successful retail outfit in the town of Jagna, Bohol, for as far back as memory goes. From a humble beginning as a stall holder in the public market, the Salas family grew the business by dint of punishing hard work into the first detached concrete two-story retail outlet catering mostly to sari-sari store owners of Jagna and nearby towns Duero and Garcia Hernandez. Jagna is a port town hosting ships to and from Camiguin and Mindanao. This gives it a strategic advantage as a crossroad for travelers and visitors. It is home to many marine OFWs and balikbayan families who build spacious concrete dwellings. Jagna also hosts the CVIF high school, run by physicists Christopher and Maria Victoria Bernido, which institution has become a must-visit for curious educators both here and abroad. Incidentally, CVIF now also hosts volunteers of the highly innovative science corps program which aims to bring frontier science to third-world high school students. Volunteers Dr. Hyunjin Shim and Dr. Victor Sojo taught applied research and rudiments of Big Data analysis to STEM students. That Jagna is a town looking up is clear to see.

Better a good neighbor than a distant cousin?

On the eve of his state visit to the Philippines last November, Chinese President Xi Jinping wrote that the two countries’ relations “have now seen a rainbow after the rain,” adding upon his arrival that friendship is “the only right choice.” He came bearing gifts for the people, from rice for typhoon victims to promises of scholarship awards, work permits for English teachers and more imports from the Philippines. At the end of the highly publicized visit, observers could only wonder, is there really a pot of gold for the Philippines at the end of the rainbow?

Property valuation services: Are we losing international competitiveness?

An important lesson of the 2008 global financial crisis is that unstable real estate markets can bring down the global economy. Corollary to that, they can deprive an emerging economy with financing, stunting investments and economic growth.

Carpenter versus plunderer

“Lo! unto us a child is born!” Not just any child but a child of a carpenter who would follow in his father’s footsteps (Mark 6:3). Carpentry creates value as it transforms plain wood into a beautiful cabinet. Honest hard work is carpentry’s signature. It is the exact opposite of plunder.

Coping with FIRe

I had the privilege to listen to Dr. Aniceto Orbeta of the Philippine Institute for Development Studies (PIDS), the government think tank, when he made a presentation on Labor and Global Development before the People Management Association of the Philippines.

Good, not great

I am pleased to share with readers the executive summary of our quarterly economic outlook report for GlobalSource Partners (globalsourcepartners.com) written by Marie Christine Tang and me last Nov. 22, 2018. The second part of this column is a statement of the Foundation for Economic Freedom supporting TRAIN 3, on property valuation for taxation purposes issued Nov. 30, 2018.

Price controls on medicines: The zombie is back!

On Nov. 15, the technical working group organized by the Senate Committee on Trade, Commerce and Entrepreneurship chaired by Senator Pimentel met on the proposed Senate bill that would create the drug price regulatory board or DPRB.

Agriculture, agriculture, agriculture

My former college economics professor, Dr. Bernie “Dr. Boom” Villegas, was once quoted chanting the mantra of “agriculture, agriculture, agriculture” when asked about the development direction of the country. Indeed, while the political Left were enamored with “nationalist industrialization,” and rent-seekers with “import-substituting industrialization,” Bernie was an outlier. After all, agriculture was unsexy, while industrialization, with its image of mighty steel mills and factory sinews, represented progress and modernization.

‘Never waste a good crisis’

There has been much hand-washing among our legislators on TRAIN 1. The unfortunate part about this is they were responding to fake news.

The Third Telco Project, Winner’s Curse and Sustainability

The government’s third telco project managed by the DICT seems on the verge of naming the lucky winner of the third player race based on the highest committed level of service (HCLoS) involving price and internet speed. The winner will operate within a narrow corridor of performance: it has to offer faster internet service at the same or at a lower price than currently on offer. The winner shall have posted a performance bond of P14 billion which will be forfeited if its performance falls below committed levels. It will then have to spend P40 billion in the first year and P240 billion in the succeeding five years. Among the committed indicators is the allocation of the capital spending: 40% for operating expenditure, 20% for broadband and 40% for national coverage. By Nov. 7 at 10 a.m., we will know the lucky winner. Or will the prize be a “winner’s curse”?

Capitalism and inclusion under weak institutions

One could not have thought of a better title for the latest book of UP Economics Professor, former Dean and National Scientist Raul Fabella, a deceptively slim volume (120 pages) but a real heavyweight. It has amazing sweep and depth on what ails our economy, and provides possible solutions, cogently pulling together literature and research on what has worked here and elsewhere.

Structural weaknesses in our economy: What to do?

In my last column, “The Structural Weaknesses of the Philippine Economy,” I said that the recent economic data show the structural weaknesses of the Philippine economy: low agricultural productivity, weak export growth, and undiversified export base, with much export concentrated in low value-added electronics sector.

Red flags in rice tariffication

The House of Representatives has passed its version of the rice tariffication law. Apparently, they did that to make good (finally after 23 years) the country’s obligation under the WTO’s agreement of agriculture to convert a quantity restriction or QR on rice imports into ordinary tariff protection.

‘Weaponized’ Incentives and TRAIN 2

Most of the time, when passions are high it is because conflicting greeds are involved. Some rare times, when passions are high it is because conflicting principles are involved. Among the promontories of contention in the proposed TRAIN 2 or its TRABAHO version is the shift from gross income taxation and other “forever incentives” to net income taxation (e.g., CIT) and time-bound incentives for PEZA locators. Since the government is switching policy lanes, this question is a propos: “Is the old system broke?” By “broke” it means wasteful.

The structural weaknesses of the Philippine economy

Recent economic data show the structural weaknesses of the Philippine economy. In August, inflation accelerated to 6.4% pa from 5.7% pa in July, the...

End of the road for federalism?

IN his third State of the Nation Address (SONA) in July, President Rodrigo Durterte urged Congress to work on his proposal to change the Constitution to enable the Philippines to shift from the current presidential to a federal form of government. Curiously as we observed in our brief, he did it less forcefully then what many had expected considering that federalism, along with the drug war and anti-corruption drive, had been an oft-repeated subject of his lengthy monologues. Today, a month after that speech, the drive for federalism seems to be waning.

Q2 Growth: Old or New Normal?

THE one bright spot for the Philippines in the second half of the 21st century is its growth. The average growth rate of GDP in the last six years was 6.5%, which exceeded the 4.8% average growth under the Arroyo administration and thus was considered the “new normal.

The draft Constitution is terrible

Scratch that; the draft Constitution drawn up by the Puno Consultative Commission, is uber-terrible.

Legislation that Matters

Much drama accompanied the State of the Nation Address the other week. Hopes are high that action follows suit.

TRAIN 2: The failures it addresses

In the 2018 SONA, President Duterte affirmed his unequivocal ownership of TRAIN 1 and 2. What welcome news for TRAIN advocates who felt orphaned when, previously, the President hinted that he will leave the tweaking of TRAIN 1 (in view of inflation) to the ‘wisdom’ of Congress! A successful flagship economic program will ensure Duterte a bright legacy; a mangled one will sink that legacy no matter the political projects. Even so, TRAIN 2 still has ways to go.

Our looming electricity shortage

The Philippines faces an urgent task.

The BSP and Inflation: What Mission Creep?

The inflation rate reached 5.2% in June 2018 following 4.6% the month before. The June level is the highest in five years and breached the price target ceiling. Critics are lashing about to find fault. Demonizing TRAIN 1 is everywhere in the media and talks of rejiggering the act is afoot. Sadly, President Duterte revealed that he would leave the fate of his regime’s cornerstone economic program to a Congress that is facing midterm elections! That seems to leave his economic team in a lurch. Meanwhile, the detractors have extended the compass of their blame game to the BSP.

The Drama King

I voted for President Duterte.